“The industry will recover 4-6 months after the Corona pandemic is over”

Monday, 30 March, 2020, 08 : 00 AM [IST]

Rahul Akerkar, founder & managing partner, Qualia Hospitality LLP., is a leading restaurateur who has been associated with world-class brands such as Indigo in Mumbai in the past. Qualia, which went on stream about a year back, is known for blending modern cooking with local Indian ingredients and age-old techniques. With the lockdown over Covid-19 gripping the country, the restaurateur finds time to answer queries from Manjushree Naik, over the future outlook for the industry, over email. Excerpts:

How has it been for the hospitality industry, with the lockdown in the country, in terms of losses?

After a meeting of the Bombay chapter of the National Restaurant Association of India (NRAI) about 150-160 restaurants have suspended regular operations till the situation improves. This was not mandated by government directives, but was a collective choice of and business owners present in order to cooperate with the containment measures being implemented countrywide.

Restaurants, more than other businesses are majorly cash flow management businesses, and with the total shutdown and no revenues coming in, our very existence comes into question going forward. Those that have been in business for several years and have some reserves and those that are funded by private equity and institutions will have the wherewithal to weather this shutdown.

However, smaller, single restaurant businesses might not have sufficient cashflows to hold out much longer than that. Three main areas that account for 60% of the costs for both categories are expenses towards salaries, rent and utilities such as electricity, water, etc.

Restaurants that have been around for several years and have been profitable are likely to have some staying power. Same is the case of those businesses that have private equity or institutional funding and with deeper pockets might have the ability to tide over for a couple of months.

However, the majority of standalone restaurant owners will have no cash flow once business shuts. This is a business that is dependent on cash flow management more than any other and the eradication of cash flow and your entire top-line means you have nothing coming in. If businesses bleed dry during this time, there is a high possibility of them going under.

When was the last time the hospitality industry has seen a problem of such proportions?

The world over, this industry, as other industries, has never seen such degradation and forced shutdown of business. Its unprecedented and is now clearly an existential crises. Its time for big brother to stop listening and start acting - the world over - governments need to step in and provide stimulus packages, funds, and other accommodations for several moments going forward.

How is the staff working on daily and monthly wages coping with the situation?

Most restaurant employees across India have been laid off or asked to take leave of absence without pay, in very few cases maybe with pay or partial pay. Survival of people and their families, the ability of people to provide for their families without any cash flow is the biggest impact of the situation in the short term. Businesses are trying to raise funds for salaries to be paid, some have chosen stay partially open with skeleton staff or offer deliveries, but this is not the best step in this situation, as it will not even remotely cover the cash flows required to pay salaries to staff.

What can the government do for them?

Unfortunately, we do not have a true state funded, unemployment or social security benefit in this country like many countries over the world do. The government needs to step in and support hospitality/restaurant and other industry owners in paying their employees and/or offer a means for people to generate some salary income in this period of shutdown. Millions of people in this country are going to go broke and there will be existential and survival civil war if this continues unchecked much longer. The government must act immediately.

What kind of package the industry wants from the government?

Governments of several nations afflicted with the pandemic have made declarations towards offering stimulus packages and extending financial aid for not only the restaurant/hospitality industry, but all small to medium businesses and those unemployed. Unfortunately, that is not the case for us in India. The government needs to come up with a stimulus package to help cover rents, salaries, make accommodations in the payment of statutory payments like GST, VAT, taxes etc., make more working capital available to businesses and attractive or 0% interest rates, put a moratorium on the repayment of loans, defer statutory payments, provide payment plans for the same…I could go on, but basically what I’m saying is that we currently have no income at all - none. We have fixed expenses regardless of this, like rent and salaries which account for a huge chunk of our expenses - up to 50%. Do the math. If no accommodations or relief or stimulus is offered, then where and how do we generate the cashflow to cover these expenses. If we lay off all employees, how do we reopen at some point? If we don’t pay rent, how do we continue leasing a place. Everyone’s affected and the governments - both state & Central - need to act now.

How much time the industry will need to recover?

I wish I had the crystal ball that would answer that. The fact is we just don’t know, and not knowing makes planning all but impossible. Thousands of businesses will fold. Millions will become unemployed. This will end someday, but when, is presently not even guessable unfortunately. What’s worse is that the restaurant business will take much more time to recover than other businesses. I’m guessing at least 4-6 months after the world announces that the Corona pandemic is over or contained or defeated (by a vaccine). Ours is a business that is based on discretionary spending by people - were one of the first to collapse and one of the last to revive after a catastrophe such as this.

If the present crisis is followed by recession, what should be the industry's approach? Followed by a recession…??

We’re already knee-deep in one! The industry’s approach should be simply to survive and provide employment and be responsible for the livelihoods of the millions that we employ…and oh yeah, to also serve food and drink to our customers!

Can regulatory bodies like FSSAI do in the present situation?

This needs to be an umbrella, over-reaching, combined effort of not just regulatory bodies like FSSAI, but all governmental agencies and the state and Central governments too. This is a matter of our survival for us - as an industry and as individual businesses - and the support, relief, accommodation and stimulus has to be comprehensive and far-reaching. And, for God’s sake, act quickly, intelligently and decisively.